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Tuesday, April 23, 2013

Mongolia and Rio Tinto “are sitting in the same boat,”

Mongoliaand Rio Tinto

“are sitting in the same boat,”

Economic prosperity

Sustainable development is underpinned by sustainable
economies. We use our economic, social, environmental and technical
expertise to harness mineral resources, thereby creating prosperity for
our shareholders, employees, communities, governments, and business
partners.
The mineral wealth associated with mining has the potential to serve
as a catalyst to bring significant social and economic benefits to
Mongolia. Our Investment Agreement with Turquoise Hill Resources
(formerly Ivanhoe Mines) and the Government of Mongolia represents an
opportunity to create sustainable economic growth that will benefit the
people of Mongolia.

Economic impact of Oyu Tolgoi

Rio Tinto is making the largest single investment in Mongolian
history and is partnering with the Government and people of Mongolia for
the long term. More than US$6 billion will be invested by the time the
mine begins commercial production in 2013.
Rio Tinto is helping develop Mongolia's mining industry and driving
economic growth in Mongolia. The production of copper and gold from Oyu
Tolgoi will have a large, long-lasting and positive effect on the
economy of Mongolia, increasing GDP by 35 per cent by 2020. The
Mongolian Government will receive more than 55 per cent of profits and
up to 71 per cent of cash flow from the mine over the lifetime of the
project. Growth in manufacturing, construction, services and agriculture
will also be stimulated by Oyu Tolgoi's impact on the national economy.

'Common ground' sought in mega-mine dispute

Mongolia, Rio Tinto both have reasons to settle in time to meet June deadline

A cost overrun of a couple of billion bucks at Oyu Tolgoi (Turquoise
Hill), Mongolia’s new mega-mine, is no doubt significant even to a big
company such as Rio Tinto with sales last year topping $50 billion.

But to a “little” country like Mongolia – which may have a land mass
about twice the size of B.C., but has barely more than half the number
of people and a much smaller fraction of our wealth – it’s a
staggeringly large sum. It accounts for fully a fifth of last year’s GDP
– in relative Canadian terms, the equivalent of about $350 billion.

Which goes a long way to explain the tension between the company, a
two-thirds partner in Vancouver-based Turquoise Hill Resources, which
owns the just-opened world’s largest copper mine in remote Mongolia, and
the country, which has a 34-per-cent stake.
Mongolia’s parliament signed on in 2009 to borrow a third of the
money to fund a $4.2-billion project, says parliamentary president
Zandaakhuu Enkh-bold, who was in Vancouver last week at the end of a
cross-Canada visit.
“If at that time they had told us the cost will be $6.2 billion, then
we would have thought twice,” he said in an interview with The
Vancouver Sun.
Now that the costs have escalated so steeply, “We want to know how it happened. How much? Spent where?”
The huge proportion of Mongolia’s wealth tied up in this single
project also explains why the country is so optimistic and so determined
to see the dispute end well, and end soon.
Mongolia and Rio Tinto “are sitting in the same boat,” he said.
“Either one can shake the boat if we have a disagreement. But we can’t
overturn the boat. We both will die.
“So we need to find common ground, which is the (parliament’s) No. 1 priority today.”
He said he was confident that agreement would be reached in time to
meet a June deadline for the first export of copper from the mine.

A cost overrun of a couple of billion bucks at Oyu Tolgoi (Turquoise
Hill), Mongolia's new mega-mine, is no doubt significant even to a big
company such as Rio Tinto with sales last year topping $50 billion.
But
to a "little" country like Mongolia - which may have a land mass about
twice the size of B.C., but has barely more than half the number of
people and a much smaller fraction of our wealth - it's a staggeringly
large sum. It accounts for fully a fifth of last year's GDP - in
relative Canadian terms, the equivalent of about $350 billion.
Which
goes a long way to explain the tension between the company, a
two-thirds partner in Vancouver-based Turquoise Hill Resources, which
owns the just-opened world's largest copper mine in remote Mongolia, and
the country, which has a 34-per-cent stake.Mongolia's parliament
signed on in 2009 to borrow a third of the money to fund a $4.2-billion
project, says parliamentary president Zandaakhuu Enkh-bold, who was in
Vancouver last week at the end of a cross-Canada visit.
"If at
that time they had told us the cost will be $6.2 billion, then we would
have thought twice," he said in an interview with The Vancouver Sun.
Now that the costs have escalated so steeply, "We want to know how it happened. How much? Spent where?"
The
huge proportion of Mongolia's wealth tied up in this single project
also explains why the country is so optimistic and so determined to see
the dispute end well, and end soon.
Mongolia and Rio Tinto "are
sitting in the same boat," he said. "Either one can shake the boat if we
have a disagreement. But we can't overturn the boat. We both will die.
"So we need to find common ground, which is the (parliament's) No. 1 priority today."He
said he was confident that agreement would be reached in time to meet a
June deadline for the first export of copper from the mine.
"We need the cash flow," he said bluntly.
The
dispute and related issues have coloured both the performance of
Turquoise Hill's stock and the international view of Mongolia as a place
to invest in recent months.
The company's stock is trading in the mid-$6 range, down from a peak of about $28 in early 2010 and about $15 a year ago.
And
foreign investment in Mongolia nosedived last year, plunging 17 per
cent to $3.9 billion, in response to what was seen as heavy-handed
legislation concerning foreign partnerships.
Enkhbold conceded
that the law hurt his country's business reputation, but adds that
investors' fears will be eased now that the legislation has been revised
and clarified. The threshold for requiring parliamentary approval for
foreign investment has been raised from about $72 million to about $720
million, he said, and it has been made clear that this applies only to
investments by state-owned enterprises.
The Turquoise Hill investment is private, and therefore exempt, he said.
But it is so large it has made Canada the second-largest foreign investor in the country, behind China.
Enkhbold
said mining has come to dominate the country's economy, and the revenue
from it is urgently needed to give the government the means to invest
in other sectors - mainly agriculture, tourism and services.
"Mining
doesn't employ a lot of people. It employs a lot of big machines," he
said. "We have very high unemployment, and without diversification of
the economy, it will stay high."
-Oops: I misread the fine
print on the government's HST/PST website when I was researching
Monday's column. The seven-per-cent PST will apply to car repairs,
bringing the total federal and provincial tax to 12 per cent - the same
as it was under the HST.